‘DMBs provide 70% of total banking credit’

The deposit money banks (DMBs) provide close to 70 per cent of total credit in the banking system, FBN Capital has said.

It said that net loans from the banking system including the Central Bank of Nigeria (CBN) to the private sector, defined as the domestic economy other than the Federal Government, contracted by 0.9 per cent month on month in December and increased by just 7.4 per cent year on year.

It said the modest rate of loan growth over the year may surprise, given GDP growth of more than six per cent. “We could query both data series but we can also observe that the marked slowdown of lending growth since the twin bank bailouts of 2009 has had a limited effect on Gross Domestic Product expansion,” it said.

FBN Capital said although some might argue that the banks’ cash reserve requirement (CRR) of 12 per cent inhibits lending growth but the growth was subdued before the increase in the CRR by the Monetary Policy Committee in July 2012.

“Over this period the banks have enjoyed higher and safer returns in the government debt market although this advantage has been eroded by the yield compression of about 600bps on FGN bonds and NTBs since August 2012,” it said.